Nordstrom, Inc. (JWN) — This retailer, which operates more than 300 stores in 38 states, is known for its emphasis on service. But this alone will not protect it from a deceleration in the U.S. economy.
In November, S&P Capital IQ Equity Research lowered its target on JWN stock by $23 to $59. Its analysts noted a shift in consumer spending from apparel to things such as auto and electronics, even among affluent shoppers. They also note the risk for declining consumer confidence among this core customer group due to declines in the financial market.
Nordstrom entered the highly competitive Manhattan market last year, as well as the Canadian market, which has been hard hit by currency devaluations.
Competitor Macy’s, Inc. (M) announced Thursday that comparable sales at stores open at least a year fell 4.7% year over year in November and December. Management also lowered earnings guidance again and announced job cuts and 40 store closures. This should have a negative impact on the entire retail group.
JWN double-topped at about $75 in July and August and has been in a bear market ever since, breaking down through its 50-day and 200-day moving averages in late August. My proprietary internal indicator, the Collins-Bollinger Reversal (CBR), has flashed a sell signal eight times since October, including one on Tuesday.
Above-average selling, a flat MACD and a lower close under the resistance line at $50 indicate further weakness.
Sell JWN stock short at $48 or higher with a target of $38, which would result in a gain of 20%-plus. As with all short sales, protect against the potential for a theoretically unlimited loss by entering a stop-loss order at $53.
